The recovery is getting legs

Attendance at boat shows has been picking up and dealers are happy with their results.

Though the scars of recessions past continue to linger with businesses as well as consumers, the industry seems poised at the midway point of the year to have a pretty solid 2016 if the current trajectory continues.

It’s still not easy, and closing sales continues to be hard work, many say, but it seems that the industry is breaking out of its snail-paced incremental recovery to finally see some momentum building.

“Things are pretty strong right now,” says National Marine Manufacturers Association president Thom Dammrich. “My sense is that the U.S. economy is going to continue to improve, and I feel like things are actually starting to accelerate a little bit. Consumer confidence is up again. Housing is continuing to regain strength. The Fed is talking about another couple of interest-rate rises this year, and that tells me the economy is pretty solid. We’re starting to see some signs of wage inflation, and we are reaching full employment. Manufacturing, which had been in a bit of a slump, seems to be coming back. Europe is strengthening, which means the dollar will weaken, and that helps exports. Barring some major thing, I think things are lining up nicely for the next couple of years.”

“Things are going well in general with the economy,” agrees Matt Gruhn, president of the Marine Retailers Association of the Americas. “With the light winter that we had and a pretty decent spring so far, customers are back. It feels like they’re in the mood and mode of looking at how they can enjoy the boating lifestyle. Look at some of the dealers having early success; it’s really about them getting out and getting active and giving themselves the visibility to attract the customers. The customers are hungry. They’re looking for ways to spend family time.”

New events

Some dealers are reporting a strong start to the boating season, and several say they are seeing attendance at events such as open houses and small boat shows far exceed expectations.

“There’s an uptick in activity for sure this year,” says Bob Denison of Fort Lauderdale-based Denison Yacht Sales, which has 19 locations nationwide. “Across the board we see a lot of events; boat shows and open houses are really well attended.”

The company held a “Then and Now” Hatteras event in late May, bringing in Knit Wits, the legendary first Hatteras yacht, along with the newest yacht in the line, a 70-foot model. Triple the expected number of people showed up.

“On an open-house level, they’re really hard to pull off because it’s tough to get a lot of people to come,” Denison says. “But the last two we’ve done, including the Hatteras event, we were expecting 40 or 50 people, and we had 120. So it’s not just people active on the buying front — it’s people having interest and seeing what’s new to the market.”

MarineMax does upward of 1,000 events a year as a company, says Chuck Cashman, executive vice president of sales, marketing and manufacturer relations. “We have almost 60 stores. Minimally we’re doing something every month [at each store], and most stores do events more regularly than that. It’s a huge part of our culture, and it’s going incredibly well.

“We just came back from Italy — we took over 60 customers to the Azimut gala,” Cashman says. “That’s a lot of people to take to a gala. We think we’ll sell some boats out of it immediately — it’s always our goal, and it’s never our goal. We’re going to tee up a phenomenal trip, tee it up with good people, and if they have a good time we’re probably going to sell some boats out of it.”

Joe Lewis of the Mount Dora Boating Center and Marina in the greater Orlando, Fla., market, agrees that sales events are being well attended and says his company is making sales during them. “We did a Welcome to the Water event the weekend of April 30-May 1, and it was pretty successful,” Lewis says, adding that the company sold five sterndrive boats. “Three boats we sold that weekend were to people we’d never seen before.”

Lewis says the housing market is picking up in Florida, which is helping new-boat sales. “This is probably our most successful year to date since the economic recovery. I’d say it was incremental growth up until our last on-water event. That’s what made it so much better than any year since the downturn.”

Boat shows are paying off, but there also is a trend toward smaller, customized events.

Savvier dealers

Dealers have gotten smarter as a result of the industry’s long and grueling climb out of the slump, Gruhn says. Boat shows, though still crucial, line dealers up among competitors. “When they can customize an event to engage with customers and have a captive audience with their own prospects, I think by the nature of that they’re going to be more successful. What dealers learned through the recession was how to be most effective with their dollars. So when they go to spend money on attracting customers and marketing to customers and creating events, they’ve learned how to be really effective with that. These kinds of events are more effective than they’ve ever been because dealers have learned how to make it that way.”

Everyone is looking for more effective ways to sell products because closing a deal is still tough, Dammrich says. “Whether it’s open houses or other small events, it’s all about return on investment. A big show brings a lot of people, and there’s an opportunity to sell a lot of boats, but it costs a lot of money to be there. At smaller events, a dealer might sell fewer boats but the investment is smaller, too.”

EdgeWater Power Boats credits the double-digit growth it’s experiencing for a third consecutive year to dealer innovation, says Peter Orlando, sales and marketing director for the Edgewater, Fla.-based builder of center console and dual console outboard boats.

“Dealers are getting much more savvy about how they spend their money. I think they’re being judicious in a lot of ways,” Orlando says. “The winter boat shows, especially the NMMA show in Boston, have been excellent. But dealers are taking a lot more energies and resources and putting them into smaller venues and more proprietary venues — open houses, small get-togethers, ride-and-drive events — and that’s having a very positive effect. Putting people in boats, giving them the opportunity to meet and greet, allowing dealers to socialize with customers on a one-on-one basis, I think it has a long-term residual effect for those people, even those who don’t purchase boats on those particular days. It’s creating relationships that generate sales down the road. It’s really good marketing.”

Many reported having strong sales and interest during the winter and spring boat shows, as well.

Although in recent years the Internet has created much more transparency about pricing, dealers such as Lewis don’t see that as a negative.

“A more informed consumer does not bode well for spectacular event sales, like the days of selling 50 boats at a boat show,” he acknowledges. “But I’ll take today’s consumer that’s more informed, knows going in what the costs are going to be.” Uninformed customers can turn into problem customers, says Lewis. “The reason they’ve turned into a problem customer is because they weren’t having a good time,” he says. “When people are having a good time with boats, they’re a lot more fun to work with.”

Keeping them on the water

Lewis says that especially with customers who are new to boating — and he’s seeing more now than in years — he tries to keep them on the water. “Time is probably my biggest competitor when it comes to selling boats and keeping people in boating,” he says, adding that he is coming up with a fractional ownership program for smaller boats for that very reason.

The dealership also organizes dinner cruises, a scalloping trip every year and movie nights on the water. “We’re constantly looking at things like that to give people an excuse to come use their boats. We try to do one a month.”

Denison Yacht Sales had already gotten double the amount of RSVPs by late May for a Labor Day trip to Bimini this year as last year. “I think we dealers are doing a better job, as well, giving customers things to do on the water,” Denison says. “I think the greatest enemy to boating succeeding is not the economy or other politics; the biggest enemy to boating succeeding is making sure people buying boats are out having fun on the water. We all have a lot to learn from MarineMax and Chuck Cashman, who in my opinion does an excellent job in giving people things to do on the water.”

MarineMax does a slew of such events. A Sea Ray- specific event will take place in late July in Montauk, N.Y., says Cashman. “We’ll have 60 boats in Montauk — Sea Rays only, but all vintages, all sizes — and have a big party. Last year it was a big black and white party. And it’s all kinds of boats, from a $2 million 60-foot boat to the smallest, which last year, I believe, was a 24-footer.”

Boston Whaler planned to take 50 boats to Bimini on Father’s Day weekend. “The events really do work,” says Cashman, but “they’re not easy,” he cautions. “Somebody who thinks all you do is put an event on the calendar is misguided. What you’re trying to get is customers’ time, and their time is very valuable. You sell it as hard as you sell an appointment or a boat. We know the payoff; if you’re going on these events, you’re using your boat and becoming a bigger part of the family. We don’t need anybody leaving boating. So we put an intense focus on making sure our customers are boating. I believe we do a very good job organizing and executing our trips. So if you work hard to get customers on a trip in year one and it doesn’t live up to expectations, you won’t get them in year two.”

The company’s biggest Florida event is a lobster bash, and 10 people work solely on creating the event for a month and a half. “We dedicate serious assets to it. It’s a ton of work, but that is part of our culture,” Cashman says.

Mount Dora Boating Center and Marina in the greater Orlando, Fla., area has had success with special sales events.

Boat shows and world markets

Boat shows around the world have been an important part of Azimut sales, according to owner and vice president Giovanna Vitelli. This year, she says, shows in the United States and the Middle East have done particularly well.

“Generally we can observe a moderate increase in terms of units, which is supported by an improvement in terms of turnover — far more important — due to the increase of the average dimensions of the boats sold,” Vitelli says. “The boat shows represent a fundamental element of our commercial strategy. In these events we get the chance to be close to the client both in a direct way with our Azimut managers and through our dealers.”

Three factors have contributed to the company’s U.S. success, Vitelli says. First, there is a strong attraction for “made-in-Italy” products that are also high-tech and innovative. “For instance, when Azimut proposed the S line with its three Volvo Penta IPS models, the North American market responded with stunning numbers, as is happening today for the Azimut 72 and the Azimut 66, the first carbon-fiber-superstructure models,” she says.

Second, the distribution network through MarineMax has been invaluable to penetration, service to clientele and reliability, she says. And third, Azimut’s strong presence based in Florida, a service storehouse of more than $1.5 million in value, can deliver on warranty and extra work, she says.

“The European market during 2015 and 2016 has shown signs of recovery,” Vitelli says. “This happened also for the Mediterranean countries — Italy, France and Spain — which were affected more than others by the heavy slowdown. It is remarkable, overall, that the clients of the medium and small category of boats from 45 to 60 feet came back on the market.”

New product

Denison attributes stronger new-boat sales to the technology being built into boats, making them easier to use and safer than ever. “For the first five months of the year we’ve almost doubled new-boat sales, compared to the previous year,” he says. “There seems to be more people buying new, which is a great thing. The Beneteau lines, not only on the sailboat side but also power, have been very successful.”

The Monte Carlo lines have been very sought after, particularly at the Fort Lauderdale store, because Beneteau has embraced IPS technology and stepped-hull design and has seen the fruits of the time and money it has invested on research and development, Denison says. “And it shows. The stuff they’re coming out with is extremely special.”

New models are driving growth for EdgeWater, as well, Orlando says. “We came out with two new models last year; the 368CC is doing really well, beyond what we expected. The 248CX is really driving our median-line business. Center consoles are doing well. That 32 does quite well. We’re really seeing growth across the board and are pleased that the growth is coming across many units, not just a few.”

EdgeWater has not been able to keep up with demand, which Orlando acknowledges is a much preferable problem to the type that builders had in 2008. That has prompted the company to expand its facility by 22,000 square feet, to 62,000.

“We transitioned production lines during the months of March and April,” Orlando says. “At the same time we increased from 98 to 120 builders during that period. The additional space allows us increased capacity for our larger boat lines 280CC and CX, through our 368CC. We hope to see the benefits of the added square footage and personnel in the not too distant future.”

Builders have been cautious about increasing capacity because of a lingering hangover from the Great Recession, but they have finally reached the point of demand that many need in order to do so, Orlando says.

New product has helped Correct Craft start the 2017 model year strong, says CEO Bill Yeargin. “All of us would prefer stronger economic growth, but at least we are growing and well ahead of last year.”

It has also made acquisitions more palatable. In May, the parent company of Nautique entered the aluminum fishing boat segment when it bought SeaArk Boats. It was the most recent in a string of purchases during the past couple of years.

“We are approached regularly by companies who want us to consider buying them,” says Yeargin. “I believe we have developed a reputation of being a good buyer who will protect the brand, legacy and employees. That is attractive to sellers who have spent their lives building both a business and relationships with employees, dealers and vendors.”

Companies in general are doing much better since the recession, which makes them more attractive and valuable to buyers, Yeargin says. “Many still have debt-filled balance sheets that they are trying to improve years after the recession,” he says.

Election year

Many say the fact that this is an election year does not seem to be hampering sales. “I try not to break out the pixie dust because anything can change relatively quickly, especially in an election year,” Orlando says. “Usually when we’re in an election year it can have a deleterious effect on purchases. I must admit — every year you see some slowdown, but in the last two election cycles we hadn’t seen that slowdown as great as in past election years.”

Orlando continues: “I do think what’s happened is you have consumers who have made decisions to do something they want to enjoy, and they’re going out and doing it regardless of who is president.”

The problem is no one likes the candidates, Dammrich jokes, but he adds that people have become exhausted by the duration of campaigns and the news saturation they generate.

“There are a lot of unknowns on where things are going and how radical some of the ideas are [among candidates],” Gruhn says. “I think at the end of the day we might see a bit of fluctuation, but the economy is still growing, and people are gaining confidence, whether it’s in the work force or customer base, and that’s a pretty strong force.”

Business at the dealer level has been busy enough that the MRAA, a group that is “in the business of talking to dealers on a regular basis,” finds that dealers across the country are too busy to talk right now, Gruhn says. This is a good sign, he says, because it means they’re moving boats and are busy getting them ready to put into the water or busy with an already active boating season.

Sunny days are here again

The presidential election can’t tamp down the pent-up demand that has resulted from the terrible winter of 2014-15, Orlando speculates. “This was a mild winter, with very little snow” in the Northeast, where EdgeWater sells the most boats. “We underestimate in the business how much the weather affects people. The weather was so bad [last year], it put the whole seasonality of buying a boat on hold until about August. And by that time people just delayed their decisions to winter. We had a strong fall and a strong winter. I think that was pent-up buying in the Northeast, and eventually it was a nice turnaround.

“We downplay the psychology of weather in this business, but it is a big part of the purchasing decision,” Orlando says. “We do our marketing and play up the aspirational part of boating, but sometimes the weather throws us a curveball. That’s why I think the election cycle won’t be as much of an issue as in the past. I think because a lot of people delayed their decision last year, especially up in New England, I think they’re pulling the trigger this year.”

The horizon looks good to those interviewed, even if it’s still a tougher environment than it once was. “The world is changing. You’re a commodity unless you differentiate yourself,” Cashman says. “Bill [McGill, MarineMax CEO] talks about how we do that once a quarter because he does the financial update. New products, getaways, great brands and employees — if you really dig in, if you’re opening a boat dealership, you could emulate a handful of dealers, and we’d all tell you exactly what we do. If you just sell boats, you won’t make it.”